Seeing the price drop that much that quickly is kind of shocking for Nintendo. Though when you really think about it they don't have too much of a choice. The PS Vita is going to be much more powerful, and will be starting out at $250. It will also have a lot of good launch, or near launch titles. The only thing the 3DS really has going for it is the 3D, which in my experience most people don't really care about. At $170 Nintendo has a much better chance of selling units. Yes they will sell them at a loss, so they will need to make up for that loss with software sales. Problem now is that even at $170 for the console there simply aren't any good games to but for the platform, other than re-makes which most people aren't going to want to pay full retail for.
As far as Handhelds VS consoles, I think there will always be a place for handhelds, but they will become more and more niche. Of course cell games/tablet game will never have the controls and depth of games on a dedicated handheld, but IMO they really don't need to. They just need to be *good enough.* Just simple games used to kill some time.